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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (88789)	8/6/2007 10:31:28 AM
From: LoneClone	Read Replies (1) \| Respond to of 206338

Peak Oil Passnotes: To Sir With love By Edward Tapamor 03 Aug 2007 at 01:40 PM GMT-04:00 resourceinvestor.com PARIS (ResourceInvestor.com) -- The U.K. has a problem: Its local oil and gas have peaked. There is no argument, it is not heresy in the local industry and you can say it without being dragged out of your office and exposed as a communist. U.K. North Sea production peaked some years back at about 3 million barrels per day and continues to decline at around 1.8 million barrels per day at the moment. The decline rate is around 7% a year. The same thing has happened in the United States. Oil production peaked at the start of the 1970s and, despite the huge concentration of capital and wells, continues to decline. These are both basic facts. The arguments arrive when the world is considered as a whole. Sir David King exposed his thinking in the past fortnight when setting out his ideas on the energy future for the U.K. They are not remarkable - for a politician. He says: “The IEA’s assessment is that oil (and gas) reserves are sufficient to sustain economic growth “for the foreseeable future” and “to meet anticipated increases in world energy demand through to 2030.” This view is supported by its latest medium-term market outlook, which predicts global oil production capacity in 2012 will be around 9 million barrels per day - 10% - higher than in 2007. Let us look just briefly at the idea that the world will add 9 million barrels per day by 2012. It is rubbish. At 85 million barrels per day at the moment, the world will need to add – at a modest 4% decline rate – an extra 3.4 million barrels per day in the next five years, simply to stand still. In order to stick an additional 9 million barrels per day then 12.4 million barrels per day is the actual amount needed. So the world will add 12.4 million barrels per day within the next five years and five months? Surely, Sir King (to paraphrase Chris Moltisanti in The Sopranos) has found the magic pixies at the bottom of his garden compelling advocates for the oil exploration business. The pixies, in their wisdom, have explained that, despite all the major companies saying their production will be flat, despite the refusal of major state companies to allow in masses of new investment, despite the huge increase in costs delaying projects right, left and centre the oil will magically appear. Damn those persuasive pixies! Then Sir King left the pixies and went to visit his friends the hobgoblins. They explained that “second-generation biofuels, hydrogen and fuel cell technologies … have the potential to replace oil as basis for our transport systems.” Sir King then repeated what the hobgoblins told him to the U.K. government. Second-generation biofuels may indeed be very useful. Unfortunately they are all currently sitting in laboratories and not in people’s cars. In fact, they are not even close to being in people’s cars. As for hydrogen and fuel cell cars, try and get a grip of what it would be like to replace all the car engines in your street. Then your borough. Then your county. Before you end up getting bored of this analogy let us jump straight to this – try and imagine replacing all the car engines in the U.S., the European Union and China for starters. Try to figure out the cost. There is one area where this column and Sir King agree. When he says “others are better placed than I to advise on wider investment and market aspects.” The reality of any peak in hydrocarbon production will not be as a consequence of geology, technology or the capacity of the human spirit. The reality of the peak in hydrocarbon production – whenever it occurs – will be the failure of market economics - the failure of capitalism to be anything other than paternalistic and reactive to events, rather than democratic and proactive. One thing does trouble this column: When Sir King says, “others are better placed than I to advise on wider investment and market aspects,” let us hope he does not ask the pixies again. If he does, everyone in the U.K., get a lifeboat.